This is an interview Peter Wilkinson gave in Railpro in November 2014.
Peter Wilkinson, managing director of Passenger Services, a section of the DfT’s Rail Executive, spoke to Lorna Slade about his new position and what he hopes to achieve, and why he wants to get away from the word ‘franchising’
The Office of Rail Passenger Services (ORPS) has been re-named Passenger Services. Is this quite a recent change and why did it happen?
It is yes. It all just sounded a little bit official, a bit like ‘Here come the Tolkien Army’. But more importantly, I wanted the word ‘Passenger’ right at the front of our title so it would remind everybody what we’re here for.
What does your role entail and what do you hope to achieve?
My role brings together all of the passenger-facing elements of the DfT’s Rail Executive. So for the first time in quite a long while we have, in one place, all of those components of our structure that deal with a whole range of passenger issues – from rolling stock and day-to-day contract management through to passenger railway franchise design and fares and ticketing – and that has principally allowed us to take a more ‘whole system’ view in addressing the challenges that passengers face today. Having said all of that, my first challenge is to build the organisation and we’re only in day two of it, so we’ve got to put it all together and make it work first. The team is about 150 people so it’s a sizeable organisation but we’ve got quite a vacancy gap and we’re in the process of recruiting.
You’re a very successful private sector consultant and now you’re leading this agency. Do you feel like your wings are clipped or you can do as good a job as you would anywhere?
I’m not just a consultant; I spent most of my career building businesses, either in the rail industry or outside of it. One of those more recent businesses was a consulting firm which I’ve sold my equity in to release myself to do this job. And there’s no doubt that in business, particularly if you are the owner, you have more freedoms. But you don’t have complete freedom – you’ve got shareholders, a board if it’s a decent-sized company, and customers, and there are plenty of regulations these days that constrain you.
The department does have additional layers of bureaucracy, but I mean that in a literal, not negative sense, and that’s in part because the Civil Service is 200 years old and Whitehall is made up of many different departments which bring their own requirements and challenges. So for example we work day-to-day and hand in glove, I hope, with colleagues in Treasury – we have to as there’s an awful lot of money going through the rail funding cycle. So there are always those sorts of interfaces you have to work through but at the moment I don’t feel overly constrained. It’s very easy inside the civil service to impose constraints on yourself if you want to and much harder to say: ‘I’m just going to get things done’, but you can do that, and there are enough senior people here who think in a likeminded way; I’ve got an excellent Permanent Secretary in Philip Rutnam, and an extremely supportive and talented Director General in Clare Moriarty, so we’ve got a good team around us and people who want to make good progress.
The government talked about a Rail Delivery Authority in 2016, is this agency a transition to that, and a transitional position for you?
I don’t see it as a transition and that’s really a matter for other people. I certainly can’t predict the future and what may come after another election. If you were to ask me personally what I think about it, I’ve had the privilege of serving in the industry in various shapes and organisational forms, and the one big lesson I took from all of that is it’s not structure that addresses the industry’s challenges, it’s people and it’s leadership. These for me are almost irrelevant to the structure. If you have the right vision and the right team of people around you, and that vision is customer-facing – one that’s been built with your marketplace and sympathetic to the needs of your market – and you pursue that – there’d be something really wrong if you completely fail.
But I understand the point you’re making. I am committed to being a part of the DfT’s Rail Executive and its team under Clare. I think there’s a lot of advantage to the organisation I run being inside the Rail Executive and inside the DfT, and some of that is to do with effective decision making. So if we need to get something done really quickly to help one of our partners in the industry or to support customers who need a change in the railway delivery, we can do that fairly efficiently, principally because we’re very close to ministers here and I’m very close to other senior civil servants whose support I might need to get that decision made. If you remove that it just becomes a little bit harder and clumsier. And that was my observation in previous industry structural guises.
How do you see franchising developing in the future?
First of all I’d really like to get away from this word ‘franchising’. We’re not Burger King. The rail industry is both really sophisticated and complex but also on some level fundamentally very simple. It’s an industry that’s about providing resources and assets to meet two principal purposes. One is to carry people and freight in your country and to support the local towns, cities and regions with economic development – railways are a very important economic asset. But secondly, a strong, healthy and competitive railway system helps any nation with its global competitive position. Britain, just like any other country, is operating in a global market and a rail system is vital to international competitiveness.
So for me this concept of franchising is a difficult one because if you look at each and every railway on its own merit, they are all very different businesses with very different drivers of demand. You start with the passenger market, you need to look at why people are travelling, where to and what kinds of people they are. You also need to understand why people aren’t using trains and why we’re not making the industry more accessible to them. A lot of people are put off the railway because of what they read about it rather than what whey actually experience of it. Many because they have some sort of disability or infirmity, or they’ve got small children or luggage – and the industry has made great strides to address those challenges, which isn’t necessarily in people’s perception – although we haven’t gone far enough by any means.
So it’s about really getting under the surface of a market and the market economics, the market drivers, the drivers for demand for rail; about understanding what towns and cities want from a railway for their own economic and development plans; looking at what industry and residency is growing up around a railway; what the metropolitan urban regional regeneration plans are in any market. And if you work from that place backwards, you get to a point where you can start to make decisions about how to better serve the needs of that market. And it’s only then, at that point, that you start to really think about the type of delivery contract you want to engage in with a partner in the private sector. And they’re not franchisees. This notion that our train operating companies are franchisees is for me slightly derisory. They are very, very important businesses delivering public services on government’s behalf. And they work very hard, in the main, to espouse the values of public service in the way that any government organisation might, so they are actually Service Delivery Partners. It really matters to me to get that language into the construct because if they’re not partners and they’re merely contractors, and they’re merely serving up the next burger, quite honestly we’re not going to deliver a railway fit for purpose for this country. And the railways are different in each part of the UK. You cannot compare an Intercity railway with a London and south east commuter one – they’re two completely different businesses driven by completely different market economics and customer needs. So a franchise implies a one model fits all approach and it just isn’t the case.
And I take it the Toc’s will enjoy that new way of thinking? Will they be receptive to it?
I hope so! That’s the world I come from and I have the hugest respect for them. I can tell you – being the MD of any Toc in this country is one of the hardest jobs in Britain today. It’s exceptionally demanding; it’s day-in-day-out hard graft. You’ve got an enormous resource base to care for, you’ve got a workforce who are looking to you for leadership; you’ve got a railway that doesn’t always function for all sorts of reasons quite often beyond your own control. And it’s a really complex big and difficult job that you have to do exceptionally well and then get up in the morning and go do it all again. There’s no option for example to think ‘I can take a year to get to this place’. Forget it.
Every day matters, every journey matters to passengers, and most people’s rating of the industry is only as good as the last journey they took. So for Toc MD’s to be concerned for their market position and their revenue in that kind of a context is quite a hard ask, and I have huge regard for them. So I hope they do believe we see them as partners rather than as burger distributors.
Are there too many franchises or too few?
Truthfully I don’t know the answer to that question. I wouldn’t like to see many fewer, and I think the reality is that we already have too many very large franchises. If I look at the WCML and at what is now the GTR franchise, these are vast businesses so if you have just one of those on your balance sheet as a transport owning group, that’s a huge single risk to be carrying and therefore your capacity to take on other passenger railway contracts might be constrained. I don’t think that’s sensible in managing the long-term health and condition of a market for passenger railways and I would prefer to see a market in which you have a good mixture of not super large, but large, medium-sized and small franchises, because then obviously an owning group can carry more on their balance sheet, but also, particularly when you have one or two smaller franchises in the mix, you will attract different sorts of entities to come into that market and look at those businesses as possibly first steps into it. And I think the barrier to market entry is very high at the moment, because of franchise size in some part.
Will you keep GTR that way?
I don’t know. Again that franchise exists because of a set of circumstances. As you know we’ve been building the Thameslink core and that’s a very substantial engineering undertaking involving a number of major rebuilds along the route, plus the introduction of a totally new and superb fleet of trains of the kind we’ve never tried in this country before. And we’re going to operate 24 of those every hour through the Thameslink core corridor – that’s almost a London underground-style service on a core heavy rail system, which is a remarkable achievement by any scale. To make that happen we had to organise the railways in such a way as to optimise the system while we’re doing a lot of engineering work, and to protect our market through that period of change and continue to preserve passenger journey opportunities. But it’s also an opportunity for us to look at the operational and diagramming efficiency of that corridor by bringing in a number of bits of other franchises. That doesn’t mean to say that it’ll stay like that. Once we’ve got this railway up and running and we’re used to how it works, we’ll probably take another look at GTR because there are many parts of it that operate in the south or north end of the route but don’t touch London, so there may be opportunities to downsize that franchise again. So it exists for a purpose, and this comes back to my point that no railway is a franchise, they’re all very different at any given moment in time. We have given GTR a seven year term and that will get us through the majority of the work that needs to be done to make Thameslink work.
What of other rail models globally and in Europe? I understand Spain and Germany are franchising. I’ve had the privilege of working in and seeing rail systems in many parts of the world and I can absolutely assure you they are not tendering passenger railways in the way we do in this country. This country is still today the only truly liberalised rail market in the world outside of Japan and possibly one or two of the Scandinavian countries. In Spain and Germany there is some concessioning of passenger railways; in the main they’re gross cost contracts so there isn’t a revenue incentive. Generally in Europe so far they have all been very small concessions compared to those we offer in this country, and those markets have very dominant national state-owned operators that either compete for or are granted those concessions on long-term contracts – here we are with a truly liberalised railway that has unlocked fantastic potential for passengers, some of which is to do with factors that would have happened anyway, but a good deal is due to the fact we now have service delivery partners working with us who are very market-focused businesses. Their whole raison d’être is to think about their passengers, their market, their geography, their routes and their passenger journey needs, and play to them. We’ve taken the sectorisation model developed within British Rail to a level that has just not happened anywhere else in Europe.
And in this country we have a number of national railway operators present who are truly very welcome and bring a lot of value-added to the market, but if I look in the reverse direction it’s not always easy to see where the reciprocal opportunity is for our firms to fish in those markets, and that’s a slightly strange thing given that actually the premise for a lot of our industry construct and structure is founded in European law and regulation, which we’ve adopted and it seems to me countries in Europe spend nearly all of their time resisting and fighting.
The real sadness for me though is all the lost opportunity in the European rail market. We’ve achieved a lot of innovation in our own market here in the UK which I don’t necessarily see in others; you can always argue that the TGV network or the Spanish high speed network is an innovation of sorts but that’s not really what I’m getting at; that’s just very big investment to produce very high speed rail routes and we’re embarking on the same ourselves. There could be such a fantastic European market for rail, and such a competing market that I can only believe would benefit the towns, cities, regions and countries all over Europe, because there would be this interchange, exchange and trade in innovation that I think is missing in Europe today.
You’ve had a stellar and long-term career within rail – in your opinion what’s the industry getting right what is it getting wrong these days?
I wouldn’t describe it as stellar. I’ve been very lucky to have worked underneath and for some remarkable people and continue to do so. I really value my working relationship with my colleagues here – Clare Moriarty and Philip Rutnam in particular. These are extremely forward-thinking and open-minded industrious people who really welcome the opportunity to positively do things differently. And that’s been my good fortune. I found that working at London Underground with Denis Tunnicliffe – a remarkable individual who picked up a railway after the King’s Cross fire, which was horrific on any level. He led change from the front and really laid the foundations for the truly spectacular system we have today. So I’ve had the privilege of working for some great people and that’s where I’ve drawn my inspiration from.
I think the industry is coping with enormous complexity remarkably well. We’re going through a period of substantial technical change; having come from an era of wheeltappers and shunters and some fairly basic engineering principles and designs, we’re now moving into a world of high speed, much higher traffic density, very new signalling and control systems, computerisation of many of the interfaces that control and operate our railway, and of course we’re dealing with growth on a scale we could never have anticipated 10 years ago and that’s volume growth, not fair box growth, at the very least around about six per cent and sometimes touching up to 11 per cent in some parts of the country. As well as that we’re seeing the effects of climate change, which is something that isn’t discussed enough.
However we are absolutely not paying enough attention to what passengers tell us. We don’t do anything like enough mystery shopping of our own and we rely too much on watchdogs to inform us about what passengers want. I’d like to see much more local focus on railways and much more outreach into society. The railway always used to have a very strong bond and relationship with the communities that it served. It employed from and retired people into those communities; it sourced all sorts of skills and engineering and widgets from those communities, and we’ve lost touch with a lot of that. I also think the issue of safety can be helped by outreach into the community, so if we don’t want children to be injured on the railway, go out into the schools and talk to them about why it’s important not to play on railways – don’t just put lots of noticeboards and signs up. So I’d like to see a lot more local market focus and a lot more corporate social responsibility in the system.
What about the way Toc’s communicate with passengers? I think many of them think Twitter is enough to bring a sense of connection…
Yes, for me it’s so mechanical, it’s not intuitive. You only have to read the press to realise there is a public concern about the privatised industry model and I think in part it’s fuelled by a belief that the railway isn’t necessarily as in touch with people and their needs as it should be. And there’s this notion of profiteering, which, by the way, is a complete myth: I can absolutely assure you that very few companies in any other industry sector would get out of bed for the sort of margins that some train operating companies are truly generating.
But an awful lot of folklore has crept into this argument around profit. I actually want Toc’s to be profitable, I want them to feel motivated, I want them to be excited to get out of bed and do the hard job day-in-day-out and to feel rewarded for that. Because it’s their profit, that, in exchange for which we would have to buy a superstructure if we were to re-nationalise the industry, to run it. We’re actually buying their superstructure and I can assure you they’re far more efficient than anything we would create as a public entity. So I think there is some concern among the public, partly because fares are relatively expensive compared to other European railways and there’s this sense that we have corporate concerns running public services. And one of the ways of mitigating that is to see Toc’s behaving with a public service ethic, getting out into society and communicating with local communities – that would help take the temperature down and create public confidence that the needs of public service are being placed before the needs of shareholders.
I interviewed a Toc manager who felt that a virtual screen running at a station 24/7 was as good as having a member of staff to talk to, albeit within workday hours. I’m not sure I agree with that. You have said you regard staff cuts as a ‘false economy’. Can you say more?
I think that’s borne of a lack of understanding of how railways function at a passenger level. There’s a place for both actually. You want exceptionally good passenger information, direct to you in any media and form and you want it 24 hours a day. You want to give people as much information as possible to help them plan their journeys under normal circumstances and when there is disruption so they can make alternative choices or plan around a disrupted railway. And the only way to do that is to use the technology and media available to you. But actually at stations and on trains I agree with you, I think there has always been a strong argument for not just a well-staffed railway but a railway staffed with very well-motivated people, so there is this genuine concern for passenger needs. Partly it’s a safety issue, and I totally support the trades unions on this point; I think they’re right about the risks of de-staffing railways and right to be concerned about the safety of passengers – particularly stations that are very crowded. There is always this slight anxiety and nervousness about getting on that train and you’re stuck in a crush of people. To be honest I want staff at platforms helping people and reassuring them ‘You know what, let it go. There’s another one just two minutes down the track so don’t rush, or crush and cool it folks’.
For me, front line staff are the heroes of this industry, they’re the people who make it work, not people like me in head offices and places; this is a nonsense, we’re just petty bureaucrats. The people who make the railway work every day are very modest, very ordinary people, often not terribly well paid, in parts of this railway that are incredibly congested. And the thought that we would have some agenda to take away, from a public service industry, that level of human commitment seems to me to be just wrong on every level. Railways exist in part to employ people, and what a great place to put them to great use, to give them a mission for life. It’s a great place to have a career and you see these wonderful people coming through the system – they come into the industry wondering why on earth they picked the railways, probably thinking it was the only place that was offering a job at the moment, and they stay with it because they grow a love for it. And it is an industry you fall in love with, no doubt about it.
Talking to you is a refreshing experience as you agree that it’s not all about the virtual interface. I do want virtual screens! But I also want to humanise rail. I want a railway that’s a human system –run by human beings for human beings. I want a system that’s cognitive and intuitive, and that functions because of people not despite them. We all have baggage don’t we and for me, partly because of my background, railways are a public service first and foremost and an economic asset second. They are very serious systems that require maturity and real leadership to make work and that doesn’t come from computers and technology. That comes from people.
You are extremely well-regarded in the industry. What do you think you’ve brought to the table at the DfT?
I really am slightly anxious about that because it takes too much away from the work that people like Philip and Clare are doing to take a large part of the civil service and make it a beacon of leadership inside Whitehall, and they are achieving in that space. Clare is a woman in the rail industry who has gone on to lead from the front. She has worked exceptionally hard to get out and know this industry very well, and she has come into it at a time of some very, very, difficult challenges. She arrived as I did literally after the procurement difficulties we had with the West Coast franchise competition two years ago. It was a very dark time with some really serious challenges to face and she navigated those with absolute aplomb. Truly I sit behind those individuals.
Finally, do you have a message for Toc managers?
They key thing for me is ‘Love your markets. Love your passengers. Get to know your markets and get to know them really well, and don’t ignore those parts of your markets that might appear to be on the fringes of your interest – it’s often in the fringes that you find the seeds of real innovation and new growth – and go explore them.’
